Holland wary of conference committee tax-cut compromise

Kansas would cut its sales, business and individual income taxes — eventually by at least $500 million a year — under a new plan designed to stimulate the state's economy, but critics worry it would create budget problems.

Negotiators for the Kansas House and Senate agreed on the plan Thursday. The compromise legislation reconciles numerous differences between the two chambers over tax policy.

The plan, drafted by three senators and three House members, would cut individual income tax rates and phase out income taxes over five years for 191,000 partnerships, sole proprietorships and other businesses — ideas pushed by Republican Gov. Sam Brownback.

The compromise legislation also would reduce the state's sales tax to 5.7 percent in July 2013 from 6.3 percent and provide additional state aid to cities and counties to keep their property taxes in check.

The negotiators don't plan to present their proposal to either chamber until they've reviewed numbers on how it might affect the state budget. Democrats involved in the negotiations don't like the compromise plan, and even some Republicans in the GOP-controlled Legislature are likely to be wary, particularly in the Senate.

But the lead negotiators, Sen. Les Donovan, a Wichita Republican, and Rep. Richard Carlson, a St. Marys Republican, were optimistic they could sell the plan to most of their colleagues. They're hoping for votes in each chamber next week.

"If we didn't think this was going to be a positive for the state and for more people to move here, more companies to come here and more jobs and more payroll, why would we do it?" Donovan said. "That's exactly why we're doing it."

The plan is expected to provide at least $119 million in tax relief for the fiscal year beginning July 1 and $500 million worth during the following fiscal year. But state researchers haven't finished their calculations, and those figures could be significantly higher.

Brownback, who made cutting income taxes his signature issue this year, said before negotiators met Thursday that he liked the direction of their talks. He described the business tax break and the lower income tax rates as core parts of the tax plan he outlined in January.

Under legislative negotiators' plan, the state's top individual income tax rate would drop to 4.9 percent from 6.45 percent, as Brownback proposed.

The negotiators — like both chambers — jettisoned Brownback's proposals to eliminate a tax credit for poor workers and popular income tax deductions for charitable contributions and interest paid on home mortgages. And the governor didn't seek to cut the sales tax or rein in local property taxes.

"It gets the individual income tax rates down for all Kansans. It lessens the tax burden on small businesses," Jones-Sontag said. "He hopes the Legislature will pass the bill quickly and get it to his desk for a big signing ceremony."

The push by Brownback and many GOP legislators to cut income taxes has drawn bipartisan criticism. More than 40 former Republican legislators had a news conference Wednesday to argue that the tax burden will shift from the wealthy to the poor and public schools will be left with inadequate funding.

"We have lots of other needs," said Sen. Tom Holland, a Baldwin City Democrat, one of the negotiators. "We're going to basically mortgage our futures on cutting income taxes for no material growth that's going to be recognized. I think it's a foolhardy exercise."